$3m super tax all but inevitable with Greens holding Senate balance

Following the landslide victory for the Labor Party on the weekend, the government looks likely to have 28 seats in the Senate while the Greens will have 11, meaning the government does not need the support of crossbenchers to pass the controversial legislation.

Peter Burgess, SMSF Association CEO, said it is now a waiting game to see the final make-up of the Senate.

“We will need to wait for the composition of the Senate to be finalised, but it is possible the government will only need the support of the Greens in the Senate to pass legislation, including the Division 296 legislation. In the previous Parliament, without opposition support, the government needed the support of the Greens as well as three independents to pass legislation,” he said.

“We will continue to alert the government and the Greens to the consequences of taxing unrealised capital gains and will continue to encourage the government to consult with industry on alternatives.”

Aaron Dunn, CEO of Smarter SMSF, said the passing of the Division 296 tax now seems a matter of when, not if.

“The question now is to what extent the Greens want to get anything else. They were pushing for a lower threshold to $2 million; however, it is hard to see how the government would agree to that,” Dunn said.

“But will the government have to give up something else for the passage [of the bill] through the Senate? Ultimately, it will be down to negotiation, then it becomes a matter of timing. Previously, the legislation was meant to start on 1 July 2025, but now it will be a matter of how much time they are going to give people before its implementation.”

He continued that the government will first have to reintroduce the bill and its passage through the Senate and would then be subject to the parliamentary calendar.

“If they wanted to push it through in a matter of weeks, they could because there is no backlog in the Senate. It will depend on what the government now wants to prioritise, based on the promises it made in its campaign,” Dunn said.

He added the fact that the government has already used the revenue generated from the proposed tax in its budget forecasts could be an indication that it would want it passed into legislation sooner rather than later.

“The government wasn’t interested in talking about the concerns [raised about the tax historically], and even off the back of its campaign it still says it will only affect 0.5 per cent of the Australian population, rather than looking at all the other aspects of the bill,” he said.

“The question really is now that based on all the concerns that have been raised whether they will come to fruition. Will there be a redistribution of money? Will money be taken out (of super) and redeployed? And if it does, will the government now have the mandate to look into how trusts operate as well?”

Meg Heffron, director of Heffron, said given the results, and the fact the government might only need the support of the Greens in the Senate, it can be assumed the Division 296 tax will become a reality.

“It will be interesting to see what changes or compromises happen from here,” she said.

“There have been many voices calling for a change in method such as one that doesn’t tax unrealised gains. In the last Parliament, concern over that specific design feature on the crossbench was enough to discourage the government from actually putting it to a vote, but I expect that resistance will also be quieter, or at least less of a barrier to the government, in the next Parliament.

“Surely, we will at least see the start date deferred. I can’t imagine a single super fund (small or large), software provider or regulator will be ready to deal with a new method for calculating total super balance by 1 July 2025.”

Similarly, SMSF Alliance principal David Busoli said the $3 million super tax being reintroduced and passed is now “inevitable”, though did not anticipate the cap to be lowered.

“Notably, the Prime Minister reiterated, last week, that the cap will not be reduced to $2 million as demanded by the Greens. Presumably the new tax will become effective from 1 July 2025, even if the legislation is not passed by then,” Busoli said.

“Given the proximity to the end of the financial year, you will need to deal with concerned clients wondering how this will affect them and if they need to take some action before the end of the financial year.”

However, Busoli said he would expect that, for most affected members, remaining in super will continue to be the best option; however, any analysis must be “bespoke” and might take time to prepare, so it will be difficult to produce and practically implement before 30 June.

“In any case it is possible, though unlikely, that the legislation will differ from what was originally introduced. Fortunately, the matter isn’t as urgent as it seems,” he said.

“The tax is based on the member’s year-end balance so, as the first year of operation will be the 2025–2026 year, it is the member’s adjusted total super balance on 30 June 2026 (not 2025) that is relevant.

“An individual with more than $3 million in superannuation at the start of, or during 2025–26, who reduces their balance to $3 million by 30 June 2026 will not be impacted by the tax. This means that action to equalise member balances might be considered before the end of this financial year, given contribution eligibility considerations, but probably little else.”